Keysight Technologies (KEYS): Fairly Priced at Current Levels, but Growth Could Unlock Value

June 19, 2025

Keysight Technologies (NASDAQ: KEYS), a leader in electronic measurement and automation solutions, is currently trading at $159.95, a price that sits near its discounted cash flow (DCF) fair value estimate of $177 as of May 2025. Supported by analyst consensus and robust financial metrics, the stock appears fairly priced but offers compelling upside potential if strategic initiatives and market conditions align with expectations.

DCF Analysis: A Conservative Undervaluation Signal

The most recent DCF analysis, conducted in May 2025, projects a fair value of $177 for KEYS, using a two-stage FCFE model. Key inputs include:
- A discount rate of 7.4%, reflecting a lower levered beta of 1.079 compared to earlier analyses.
- Terminal growth rate of 2.8%, aligned with long-term global economic growth assumptions.
- Free cash flows (FCF) projected to grow from $994.3 million in 2025 to $1.91 billion by 2034, driven by the company's focus on high-margin segments like 5G infrastructure and semiconductor testing.

As of June 2025, KEYS trades at $159.95, implying an 11% discount to its DCF-derived fair value. This suggests the stock is undervalued relative to its intrinsic worth, even after recent price appreciation.

Analyst Consensus: A Bullish, but Prudent, Outlook

Analyst sentiment is overwhelmingly positive, with a “Strong Buy” consensus backed by an average 12-month price target of $184.25—a 14.5% upside from current levels. Key highlights include:
- Upside Drivers:
- Strong free cash flow generation ($457 million in Q2 2025).
- 5–7% annual revenue growth guidance, supported by demand in aerospace/defense, semiconductor, and AI-driven testing.
- A healthy $3.12 billion cash reserve and manageable debt levels.
- Downside Risks:
- Overbought technical indicators (RSI of 89.36), suggesting short-term volatility.
- Slower revenue growth in automotive and energy sectors.

Notably, Barclays' $200 price target and Baird's $190 target reflect optimism about KEYS' long-term strategic bets, such as its AI-driven software solutions and partnerships with semiconductor giants.

Valuation Summary: A Confluence of Data

Metric	Value
DCF Fair Value (May 2025)	$177
Current Price (June 2025)	$159.95
Analyst Consensus Target	$184.25
Upside to DCF	11%
Upside to Analysts	14.5%

The gap between the DCF estimate and analyst targets likely reflects differing assumptions about growth sustainability. Analysts may be factoring in higher FCF multiples or faster terminal growth, whereas the DCF model assumes a conservative 2.8% terminal rate.

Investment Considerations

1. Buy Signal: The stock's recent consolidation at $160 offers a low-risk entry point.
2. Hold Caution: Overbought technicals and macroeconomic uncertainties (e.g., global inflation) warrant patience.
3. Outlook Catalysts:
4. Q3 2025 Results: Management expects $1.305–1.325 billion in revenue, which, if met, could lift sentiment.
5. Strategic Acquisitions: KEYS' $2.53 billion debt could fund growth via targeted M&A in niche markets.

Conclusion

Keysight Technologies is a Hold with Upside at current levels. The stock's valuation aligns closely with its intrinsic worth per DCF analysis, while analyst targets suggest further appreciation if growth exceeds expectations. Investors should prioritize dollar-cost averaging into dips below $160 and monitor macro risks. For long-term portfolios, KEYS remains a compelling play on secular trends in 5G, AI, and semiconductor innovation.

Final Rating: Hold with Upside (Target: $180–$185 by end-2025).

Note: Always consider your risk tolerance and consult with a financial advisor before making investment decisions.